National News

Florida Insurance Commissioner Alleges Discrimination by Life Insurer, Liberty National

2009-07-14T13:09:00.000-07:00

Thursday, June 04, 2009

TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty has ordered Liberty National Life Insurance Co. (Liberty National) to show cause why its license should not be suspended or revoked for alleged violations of Florida law relating to unlawful discrimination based on national origin or potential travel plans.

The Office of Insurance Regulation (Office) conducted a five-month, on-site investigation at Liberty National’s Birmingham, Ala., office, June 23 to Nov. 14, 2008. Office investigators reviewed over 7,000 life insurance application files and found a total of 1,149 violations, of which 1,053 were for discriminatory practices. The findings include specific violations regarding individuals and improper company business practices.

“Discrimination of any kind by an insurance company will not be tolerated by this Office,” said Deputy Commissioner Mary Beth Senkewicz. “We will do everything within our power to ensure that Florida consumers are protected from such unconscionable practices.”

The allegations against Liberty National center on violations of Florida’s Unfair Practices law, Section 626.9541, Florida Statutes: refusal to issue life insurance policies based on national origin; discrimination in underwriting practices based on national origin; discrimination based on potential lawful travel; and discrimination based on citizenship. A significant number of consumers affected by the practices were of Haitian origin or descent.

The Office’s investigation reviewed, among other things, Liberty National’s underwriting practices, agent-training materials, forms and its new-business issue process. The investigation also revealed instances of improper notice and failure to maintain adequate records.

One aspect of the law, generally referred to as the Freedom to Travel Act of 2006, places strict limitations on the ability of an insurance company to deny life insurance based on past or future lawful foreign travel.

The order requires Liberty National to submit proof to the Office, within 21 days, showing why its license should not be suspended or revoked. Liberty National has about 182,000 policies in Florida.

About the Florida Office of Insurance Regulation
The Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. The Office protects Florida consumers through regulatory oversight of: insurance company solvency, policy forms and rates, market conduct performance and new company entrants to the Florida market. For more information about the Office, please visit www.floir.com.

Peoples Trust Insurance to Stop Writing New Policies

2009-03-18T11:53:00.000-07:00

Florida Office of Insurance Regulation Press Release
Wednesday, March 18, 2009

TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty today announced that the Office of Insurance Regulation (Office) and People’s Trust Insurance Co. (People’s Trust) have entered into a Consent Order that requires People’s Trust to stop writing new policies until it complies with provisions of the order.

As the result of the Office’s comprehensive investigation of People’s Trust, the Office found, among other things, that People’s Trust: failed to obtain inspection reports to confirm replacement cost values and/or insurability; failed to obtain proof of protective devices; failed to comply with various practices related to claims submission, investigation and payment; and failed to comply with its approved business plan, by writing more policies than allowed – an issue that could have created exposure beyond the company’s claims-paying ability.

“I appreciate the new concept that People’s Trust has introduced to the sale of property insurance in Florida,” said Commissioner McCarty. “The company has expressed some ideas that, if implemented, would address some of the most difficult issues in the property insurance market. However, insurance companies are required by law to meet certain standards. The Consent Order is intended to bring the company into compliance with those legal standards.”

The Consent Order requires People’s Trust to, within 30 days: pay an administrative penalty of $150,000 and $5,000 in costs; deposit $500,000 with the Bureau of Collateral Management; and provide the Office with a certification that required corrective measures have been implemented in compliance with the order.

The Consent Order also requires People’s Trust to use licensed agents and customer service representatives in compliance with the Insurance Code when soliciting and transacting insurance business and to provide proof of adequate reinsurance to the Office.

People’s Trust will not be able to sell new policies until it meets the conditions of the order, but it still must continue to service existing customers and claims.

The Office’s investigation of People’s Trust began in December, and an onsite examination was conducted from Feb. 1 through Feb. 20.

Florida Office of Insurance Regulation Submits Annual Report on Freedom to Travel Law

2009-03-18T11:43:00.000-07:00

Florida Office of Insurance Regulation Press Release
Monday, March 02, 2009

TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty has submitted the 2009 Freedom to Travel Report to legislative leaders detailing the Office of Insurance Regulation's (Office) efforts to implement the "Freedom to Travel Act." Passed in 2006 and codified into law at Section 626.9541(1)(dd), Florida Statutes, the legislation placed strict limitations on insurance companies' ability to deny or increase premiums for life insurance based on foreign travel.

The 2009 report to the President of the Florida Senate and to the Speaker of the House of Representatives documents a decline in the number of instances and companies that have denied or limited coverage based on foreign travel plans. The report also outlines the Office's enforcement efforts. Since the 2008 Freedom to Travel Report, the Office has fined two companies a total of $310,000 for noncompliance with the statute.

"This report shows that we continue to see progress on this very important issue," remarked Commissioner McCarty. "The Florida Legislature's action and the Office's enforcement efforts have helped preserve Americans' rights to unrestrained, lawful travel outside the United States."

The law states that an insurer may not refuse to issue life insurance to; refuse to continue the life insurance of; or limit the amount, extent, or kind of life insurance coverage available to an individual based solely on the individual's past lawful foreign travel experiences or future travel plans.

The report also names 93 insurance companies that ask travel-related questions on at least one of their life insurance applications. The data call, sent to 493 insurance entities authorized to write life insurance or annuities in Florida, allowed the Office to survey one million life insurance applications.

The Office found evidence that five companies had violated Section 626.9541(1)(dd) regarding the treatment of foreign travel. Pending the outcome of further investigation, it is likely that these companies could be fined under the statute.

This is the third report prepared by the Office on the Freedom to Travel issue.

Florida Insurance Commissioner and Allstate Resolve Pending Litigation

2008-08-26T12:33:00.000-07:00

Florida Insurance Commissioner and Allstate Resolve Pending Litigation
August 15, 2008

Florida Insurance Commissioner Kevin McCarty announced that the Office of Insurance Regulation reached a limited agreement with the Allstate Companies.

The agreement includes a $5 million fine to resolve the ongoing issues that had become the subject of numerous proceedings stemming from Allstate's September 2007 rate filing, the Jan. 15 public hearing and related subpoenas, issued Oct. 16, 2007, by the OIR.

Other terms of the agreement require Allstate to lower its homeowners insurance rates in all territories of the state by 5.6 percent within 30 days of this agreement, for a total reduction of 19.8 percent when including the 14.2 percent reduction that took effect June 1, 2007. Allstate also must write 100,000 new homeowners insurance policies over the next three years; and Allstate's corporate office must cancel a $175 million surplus note it issued to the Florida Allstate companies.

Allegations against Allstate included failure to freely provide the documents requested in the October subpoenas; falsely asserting trade secrets in its September rate filing and false certification of its September rate filing.

The $5 million fine will be paid within 30 days of the agreement by the Allstate corporate office in Northbrook, Ill., not by the Florida companies. The fine will be paid to the Insurance Regulatory Trust Fund.

Of the 100,000 new policies to be written over the next three years, 50,000 must be basic homeowners policies, and 50,000 must be condominium, renters and other residential property insurance policies.

Cancellation of the $175 million surplus note is expected to enable the company to solidify its Florida capital base and enable it to write more policies for Florida consumers.

This agreement settles the pending matters, which means the hearing at the Division of Administrative Hearings that had been set to begin Sept. 15 is canceled.

In addition, Allstate agrees to cooperate with the OIR's ongoing investigation into the relationships between insurers, trade associations, rating organizations, modelers, reinsurers, reinsurance brokers and other entities.

Further, Allstate must continue to cooperate with the OIR's investigation of its claim-payment practices -- including matters related to the 1992 McKinsey report.

Allstate was suspended Jan. 17 after the commissioner abruptly halted a Jan. 15 hearing that was to look into the Allstate Companies' reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations.

Allstate was to have provided all appropriate company documents related to the above topics by Jan. 15 and was to have brought appropriate witnesses to testify about the documents and issues at the Jan. 15 hearing, but failed to do so. Instead, the Office of Insurance Regulation (Office) received 51 pages of objections to the subpoenas.

Allstate appealed the suspension to the First District Court of Appeal asserting that the commissioner had exceeded his authority; the court stayed the suspension until it could consider the issue.

In its April 4 opinion, eventually replaced by its May 14 opinion, three DCA judges unanimously agreed that the commissioner had not exceeded his authority when he issued the January order to suspend the Allstate Companies' licenses. The Court's April 4 opinion, as well as the May 14 opinion, outlined explicitly Allstate's failure to adequately comply at the Jan. 15 hearing.

On May 16, Commissioner McCarty ordered a stay of the suspension of Allstate's licenses to sell new business in Florida. Commissioner McCarty's decision came as the result of Allstate's submission of an affidavit certifying that it had complied with Florida law by freely providing all documents requested by the Office as part of its investigation of Allstate's business practices in Florida.

Florida law requires a company's CEO and chief actuary to certify that they have read the complete filing. Allstate Floridian CEO Joseph Richardson Jr. admitted during the February Senate Select Committee hearings that he had read only the executive summary of the company's filing.

The agreement applies to the following Allstate companies:

Allstate Floridian Insurance Co.
Allstate Indemnity Co.
Allstate Property & Casualty Insurance Co.
Allstate Insurance Co.
Allstate Floridian Indemnity Co.
Allstate Fire and Casualty Insurance Co.
Encompass Insurance Co. of America
Encompass Indemnity Co.
Encompass Floridian Insurance Co.
Encompass Floridian Indemnity Co.

Source: Florida Office of Insurance Regulation

Blue Cross, HMO Colorado fined by state

2008-08-12T08:21:00.000-07:00

Denver Business Journal - by Bob Mook

Anthem Blue Cross and Blue Shield of Colorado and an affiliated company were fined a total of $542,500, Insurance Commissioner Marcy Morrison said Tuesday.

According to a statement from the Colorado Department of Regulatory Affairs, Anthem Blue Cross and Blue Shield and its wholly owned subsidiary HMO Colorado Inc. were ordered to pay $290,000 and $252,500 respectively, for violating market regulations

The insurers paid the fines on Aug. 1.

The fines were the result of a market-conduct examination for the year 2006 which found that — among other things — the insurers failed to maintain required records, failed to provide coverage to newborns in some cases and didn’t properly implement processes for terminating policies. The insurers also failed in some instances to pay, deny or settle claims within the time frames required by law.

Anthem failed to properly define its terms and in some cases did not provide written denials of coverage or provide reasons for denial.

HMO Colorado Inc. also was cited for not disclosing policies for obtaining emergency medical services.

“We have made it clear that our mission is to protect consumers and this market-conduct examination and resulting fine reflects our commitment,” Morrison said in a statement.

Sally Vogler, a spokeswoman for Anthem Blue Cross and Blue Shield, said the insurer worked closely with Morrison during the exams and is working to improve some of the concerns that resulted in the fines. She attributed many of the violations to technical difficulties associated with converting to a new data system between February and December of 2006.

While the new system designed to give consumers faster, more accessible and more accurate information to benefits, Vogler said that “conversions of this nature are extremely complex.”

She also said Anthem has already corrected 95 percent of the issues identified in the insurance commissioner’s report.

“Anthem is committed to complying with all laws and regulations that govern our industry,” Vogler said. “We look forward to our continued partnership with the commissioner and her staff and to providing access to affordable, quality health care benefits to our members”

First American to pay Florida $5M

2007-11-20T05:50:00.000-08:00

First American Title Insurance Co. has agreed to pay $5 million in penalties and costs for alleged kickback payments to builders, bankers, real estate agents and brokers for business referrals, violating the Florida Insurance Code and federal law, state officials said.
A yearlong investigation by the state Department of Financial Services found that First American had created and utilized limited partnership entities to act as sham title insurance agencies as a means of funneling prohibited payments for the referral of business. The entities enlisted real estate agents, mortgage brokers, banks and homebuilders who referred business to First American's sham title insurance agencies, resulting in unfair financial gains to First American and its affiliated title insurance agencies, the state said.
Under terms of the agreement, First American must end its business relationships with 87 of its limited partnership title insurance agencies in Florida, and conduct future business activities under strict requirements subject to review of a monitor who will report inspection results on a monthly basis for a year.
After the investigation, both the U.S. Department of Housing and Urban Development and the Florida Office of Insurance Regulation were asked to join DFS in obtaining sanctions against First American. The three regulatory agencies reached an agreement with First American this week after concluding settlement negotiations.

Source: Jacksonville Business Journal

Florida Attorney General, Office of Insurance Regulation Reach $46 Million State Farm Settlement

2007-11-20T05:49:00.000-08:00

Wed, 10/03/2007 - 08:18 — newsdesk

October 2, 2007 -- TALLAHASSEE, FL – Florida Attorney General Bill McCollum today announced that the Attorney General’s Office and the Office of Insurance Regulation have reached a $46 million settlement with State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company, collectively owned by State Farm Insurance. Under the settlement, State Farm will refund excess surcharges amounting to approximately $23 million, plus five percent simple interest, to State Farm policyholders beginning in six months. State Farm will also implement rate changes that will reduce homeowner rates by a statewide average of two percent, saving policyholders another collective $23 million.

“The insurance industry must take responsibility for ensuring policyholders are treated fairly,” said Attorney General McCollum. “This settlement helps achieve that.”

Among other issues, the settlement resolves an investigation involving the companies’ failure to automatically notify eligible auto policyholders that they can transfer from more expensive policies with one company to lower-cost policies in the other company. Authorities believe there are approximately 200,000 Florida policyholders with State Farm Fire and Casualty Company. By moving eligible customers to State Farm Mutual Automobile Insurance Company, State Farm estimates 35,000 people will save $100 – $200 per year.

The Attorney General’s Office and the Office of Insurance Regulation will receive $1.5 million from State Farm for reimbursement of attorney fees and costs in connection with their joint investigation of the case.

Source: Florida Attorney General

Nationwide to reimburse homeowners for 2004 hurricanes

2006-04-28T05:51:00.000-07:00

Denies violating state insurance regulations
Florida Today
Reproduced under license from
the Copyright Clearance Center

TALLAHASSEE -- Florida's fourth-largest home insurer, Nationwide Insurance Co. of Florida, has been ordered by state regulators to find and reimburse homeowners underpaid for 2004 hurricane damage.

In addition, Nationwide has agreed to pay $250,000 to the Office of Insurance Regulation to reimburse the agency for its investigation of the company's conduct.

"This is the largest investigation I've had contact with," agency spokeswoman Beth Scott said. Though regulators won't know how much is owed to homeowners until after Nationwide completes a state-ordered review, "we're talking millions," Scott said.

In an Oct. 4 settlement, Nationwide denies violating state insurance regulations.
"We feel this validates that Nationwide's handling of claims from last year's storms was timely, efficient, and customer-focused," corporate spokesman Joe Case said in a statement.

Nevertheless, in the consent order Nationwide agrees to continue a self-audit of its 2004 hurricane claims payments and correct mistakes, including:

o failing to reimburse homeowners for sales taxes paid for rebuilding;
o failure to pay overhead for general contractors hired to rebuild;
o inconsistently holding back part of claims' checks, as "depreciation" of the damaged building.

"Holding back is fine and done by most insurers, and is legal, but not (if it's done) inconsistently," said Scott Johnson, vice president of the Florida Association of Insurance Agents.

Nationwide also acknowledges charging more than one hurricane deductible to homeowners who filed more than one claim, even if it couldn't substantiate that the damage came from more than one hurricane.

Scott said consumer complaints about Nationwide's multiple deductibles triggered the investigation.
As part of its agreement with regulators, Nationwide will pay for a state mailing to those homeowners telling them they can request a review of the extra deduction.

"Nationwide's goal in signing the consent order is the same as it has always been -- to ensure all our customers are treated fairly. Nationwide is pleased we were able to work with the OIR to resolve the issues raised," Case stated.

The Ohio-based company has 5 percent of Florida's home insurance market, behind Citizens Property Insurance, State Farm and Allstate.

After receiving state permission to raise rates an average 21 percent, it announced in August it would no longer offer new policies to Florida homeowners, though it will continue existing property policies and expand its profitable auto coverage.

Also released Tuesday is a consent order by SAFECO and its insurance companies, agreeing to pay $35,000 in administrative fees for failing to follow state regulations regarding the use of credit reports to determine insurance premiums.

Other Florida investigations triggered by the 2004 hurricanes remain confidential, including one against Citizens Property Insurance.

Florida Report Finds Weaknesses in Citizens' 2004 Hurricane Response

2006-04-28T05:47:00.000-07:00

TALLAHASSEE, Fla. November 08 (BestWire) - A report issued by the Florida
Office of Insurance Regulation has identified several areas of weakness in
the state-run homeowners insurer of last resort's response to the 2004
hurricane season. The report also notes the corrective actions Citizens
Property Insurance Corp. has since taken to address those problem areas.

The investigation was prompted by complaints made to the Division of
Consumer Services of the Department of Financial Services, according to a
statement from the Insurance Office. By Dec. 31, 2004, 6,860 complaints
about Citizens had been filed, about 6% of the total claims. A review was
performed to verify the accuracy of Citizens' filed hurricane reports with
the office.

According to the report, Citizens handled a total of 116,122 claims stemming
from hurricanes Charley, Frances, Ivan and Jeanne as of Jan. 25, 2005. Of
these claims, 86% were closed, with $1.25 billion in losses paid. The report
found a lack of dedicated resources to manage claims adjudication was
"apparent" and that Citizens did not allow for proper monitoring of claims
assigned to various adjusting firms, independent adjusters and
Adjust-Your-Own firms. This lack of monitoring contributed to the "numerous"
complaints received by the Department of Financial Services because the
company could not provide the status of reported claims to policyholders.

In response, Citizens set up a Cat Center, which helped bring in 20
independent adjusting firms; implemented a new dispatch system to use
adjusters more efficiently; re-evaluated its relationship with adjusters and
took a more active management role in responding to policyholder questions,
complaints, and managing claim closures; established a team of independent
adjusters, supervised by team leaders, so more review of claims could be
performed in-house; developed and implemented a new claims tracking system;
and redesigned its adjuster fee payments and applied accounting principals
to reassess internal controls and processes.

In addition, the report found Citizens paid about $38 million for 2004
hurricane claims in the south Florida counties of Broward, Dade and Monroe,
as of Jan. 25, 2005. A review of a sample of 30 of these hurricane claims
was made to determine if these south Florida claims were justified. Emphasis
for the sample collection was placed on hurricanes Ivan and Charley as both
were less likely to have affected south Florida.

The report found seven of the 30 claims should have had additional review
before Citizens paid the claim. Six claims received no additional review and
one did receive additional review. The reasons the claims should have been
reviewed were they were reported "substantially" later than the storm, the
damage was possibly pre-existing, or no supporting documentation of the
damage was made.

The report also found:

- Check stock at Citizens' Cat Center was left on the printer when no checks
were actively being printed;

- The company's back-up data center is close enough to the main data center
that a single storm could knock both out of commission; and

- The Tallahassee data center has no generator.

Citizens responded by tightening control over the check stock and in June
2005, hired a manager of disaster recovery and system security who is
currently reviewing Citizens data centers and information technology
disaster recovery plans.

Since the investigation, Citizens has changed its procedures for outsourcing
claims to adjusting firms and improved the information available to its
staff. The company has also upgraded its data collecting methods to ensure
the data reported to regulators is correct and complete.

Attempts to contact Citizens for comment were not immediately successful.

An independent financial audit had found a $516 million deficit in Citizens'
high-risk account as a result of the four hurricanes that ravaged the
Sunshine State in 2004 (BestWire, April 19, 2005). Citizens estimates its
total losses from hurricanes Charley, Frances, Ivan and Jeanne at $2.2
billion, with $1.6 billion coming from the high-risk account. Earlier this
year, Citizens approved a 6.8% assessment on all licensed property insurers
in Florida to pay for the deficit (BestWire, Aug. 18, 2005). That cost will
be passed on to all policyholders through higher rates. About 5.5 million
policyholders in Florida would be affected by the surcharge (BestWire, April
19, 2005).

Citizens' high-risk account writes wind-only coverage for homeowners living
in Florida's coastal areas, primarily in the southern counties of Dade,
Broward and Palm Beach. The personal-lines account writes all perils,
including hurricane coverage, for homeowners and condominium associations
that can't find coverage in the private market.

Citizens is also facing an investigation of allegations its former chief
operating officer took bribes and kickbacks (BestWire, Oct. 11, 2005). The
allegations surfaced in an amended lawsuit Universal Risk Insurance Services
Inc. filed in mid-September in Harris County, Texas District Court against
Citizens; Paul Hulsebusch, Citizens' chief operating officer; and Quantum
Claim Service LLC. Universal Risk, which performed insurance adjusting
services for Citizens after the 2004 hurricanes, alleges that Citizens' owes
it more than $1 million. But Universal Risk also alleges that Quantum and
its owners, Rodney and Sonya Harrell, paid bribes and kickbacks to
Hulsebusch. As of mid-September, "the bribes that have been discovered
amount to literally thousands and thousands of dollars in goods and
merchandise" purchased by the accused, Universal Risk's suit contends.

About two days after Universal Risk provided evidence of the bribes and
kickbacks to Citizens' attorneys, Hulsebusch tendered his forced resignation
to Citizens, according to the suit.

In 2004, the top five writers of homeowners multiperil in Florida were:
State Farm, with a 23.8% market share; Allstate, with 10.8%; Poe Insurance
Group, with 6.5%; USAA, with 5.3%; and Nationwide Group, with 5.27%.
(By Rick Cornejo, associate editor, BestWeek: rick.cornejo@ambest.com)
BN-NJ-11-08-2005 1127 ET #

GALLAGHER ANNOUNCES $2.2 MILLION IN REFUNDS TO TITLE CUSTOMERS IN CENTRAL FLORIDA

2006-04-27T15:19:00.000-07:00

CONTACT:
Tami Torres (850) 413-2842

TALLAHASSEE— Tom Gallagher, Florida’s chief financial officer, today announced that approximately 10,000 Central Florida residents will soon benefit under a $2.2 million refund program agreed to by Fidelity National Title Insurance Company. The refund program was the result of the Department of Financial Services’ investigation of illegal referrals to title agencies for business.

“The recent housing boom in Florida is a big component of our state’s recent economic success,” said Gallagher, who oversees the department. “This office will continue to do everything it can to keep our economy growing, and protect Florida homeowners during the process of purchasing a home.”

Title insurance is required by mortgage lenders to protect themselves and the homebuyer from property ownership disputes.

Under the refund program, Fidelity National title customers who paid for title insurance provided by one of 60 title agencies in Central Florida will receive 30 percent of the title insurance premium paid at the time of closing within the next 120 days. A list of the 60 title agencies is attached.

Gallagher said that Fidelity National Title Insurance Company cooperated with the department to establish the refund program.

The company also paid a $1 million fine and agreed to terminate its relationships with title insurance agencies that received illegal payments for referrals of title insurance business. Bogus affiliated business arrangements were set up to funnel the improper payments.

Simultaneously, Gallagher is taking action to revoke the licenses of the 60 title agencies involved in these illegal arrangements. Investigators with the department’s Division of Agent and Agency Services said the sham entities did not have separate telephone lines or offices, did not have full-time employees, and business operations were in name only.

“We will continue to aggressively investigate and take severe action against title agents and agencies involved in these unethical and illegal arrangements,” said Gallagher.

Title insurance companies and agents are barred under state and federal laws from entering into illegal affiliated business arrangements in an attempt to funnel improper payments to builders, real estate agents or mortgage brokers. They are also barred from providing payments and providing other things of value to real estate agents, mortgage lenders and builders in exchange for business referrals. Illegal inducements include direct payments, free advertising, paying for office equipment, and gift certificates.

Last year, Gallagher issued a warning to the industry against engaging in illegal kickback arrangements. Gallagher said that his office is currently investigating all title agencies for similar practices. Fidelity National Insurance Company is the first to reach a settlement with the department.

To file a complaint, visit the Department of Financial Services web site at www.fldfs.com or call the toll-free consumer helpline at 1-800-342-2762.

LIST OF TITLE AGENCIES